Question 1

Activities a local government can engage in are classified as governmental, business-type, or fiduciary.

Accepted Answer

This statement is true. Local governments engage in various activities, and these activities can be classified as governmental (related to public services such as schools, police, fire departments), business-type (related to commercial activities such as utilities or parking), or fiduciary (related to managing trust funds or employee pension plans).

Question 2

All capital assets acquired by or used by a fund should be reported in the fund balance sheet or statement of net position.

Accepted Answer

Capital assets are typically reported in the government-wide financial statements, not in the fund financial statements, which focus on current financial resources.

Question 3

A debt service fund is used to account for financial resources segregated for the purpose of making principal and interest payments on general long-term debt.

Accepted Answer

A debt service fund is specifically designated to ensure that principal and interest payments on general long-term debt are made in a timely manner, and is therefore used to account for these financial resources.

Question 4

Governmental funds account for assets but not the liabilities.

Accepted Answer

This statement is false. Governmental funds account for both assets and liabilities. In fact, the accounting equation for governmental funds is: Assets = Liabilities + Fund Balance.

Question 5

Revenues is an example of what the GASB terms an inflow of resources.

Accepted Answer

The GASB defines revenues as an inflow of resources, so the statement is true.

Question 6

The governmental funds category includes the General Fund, special revenue funds, debt service funds, capital projects funds, and internal service funds.

Accepted Answer

Internal service funds are categorized under proprietary funds, not governmental funds. Governmental funds include the General Fund, special revenue funds, debt service funds, and capital projects funds.

Question 7

Deferred outflow of resources is a type of asset that is unique to government.

Accepted Answer

The answer of Deferred outflow of resources is a type...

Question 8

According to the guidance of GASB Concepts Statement 3, financial information can be communicated by recognition in the financial statements, disclosure in the notes to the financial statements, presentation as required supplementary information, or presentation as supplementary information.

Accepted Answer

This statement is true according to GASB Concepts Statement 3. Financial information can be communicated through recognition, disclosure, required supplementary information, or supplementary information.

Question 9

An expenditure is an example of what the GASB terms an outflow of resources.

Accepted Answer

An expenditure is defined by GASB as an outflow of resources in a government's reported financial statements.

Question 10

Governmental funds are identical to governmental activities, proprietary funds are identical to business-type activities, and fiduciary funds are identical to fiduciary activities of a government.

Accepted Answer

While governmental funds are used to account for general government activities and proprietary funds are used to account for business-type activities, fiduciary funds are used to account for assets held by a government in a trustee or agency capacity. Therefore, fiduciary funds are not identical to fiduciary activities of a government.

Question 11

When revenues are legally restricted by external resource providers or committed by enabling legislation for particular operating purposes, a private purpose trust fund is created.

Accepted Answer

A private purpose trust fund is used when resources are provided under a trust agreement where the principal and income benefit individuals, private organizations, or other governments, not for operating purposes.

Question 12

Governments can, in part, demonstrate operational accountability by reporting proprietary and fiduciary fund financial information, as well as all government-wide financial information, using an economic resources measurement focus and the accrual basis of accounting.

Accepted Answer

Reporting proprietary and fiduciary fund financial information, as well as government-wide financial information, using an economic resources measurement focus and accrual basis of accounting demonstrates operational accountability for governments.

Question 13

Only those governmental and proprietary funds that meet the GASB size criteria for major funds are reported in separate columns of the governmental and proprietary fund financial statements.

Accepted Answer

The answer of Only those governmental and proprietary funds that...

Question 14

Expenditures are never recorded in governmental funds.

Accepted Answer

Expenditures are recorded in governmental funds, which are used to account for the general operations of governments and include the general fund, special revenue funds, debt service funds, capital projects funds, and permanent funds.

Question 15

According to GASB Concepts Statement 1 a primary objective of financial reports is to provide information useful in determining the accountability of the government.

Accepted Answer

GASB Concepts Statement 1 states that a primary objective of financial reports is to provide information useful in determining the accountability of the government.

Question 16

Because budgetary accounts are used by governments, government financial statements can never be said to be in accord with generally accepted accounting principles.

Accepted Answer

Government financial statements can be in accord with generally accepted accounting principles (GAAP) as the Governmental Accounting Standards Board (GASB) provides GAAP for state and local governments, and the Federal Accounting Standards Advisory Board (FASAB) does so for federal entities.

Question 17

The types of funds that may be used in governmental accounting are classified into the three categories of governmental, proprietary, and fiduciary.

Accepted Answer

This statement is true. Governmental accounting divides funds into three categories: governmental funds, proprietary funds, and fiduciary funds.

Question 18

The maximum sets of fund financial statements a government would present are three.

Accepted Answer

The maximum sets of fund financial statements a government would present are three - governmental funds financial statements, proprietary funds financial statements, and fiduciary funds financial statements.

Question 19

Economic resources are cash or items expected to be converted into cash during the current period, or soon enough thereafter to pay current period liabilities.

Accepted Answer

Economic resources include not only cash and items expected to be converted into cash but also other assets and resources that a company uses to produce goods and services, not limited to those for immediate or short-term conversion to cash or for paying current period liabilities.

Question 20

A deferred inflow of resources is defined as "an acquisition of net assets by the government that is applicable to a future reporting period."

Accepted Answer

This is the correct definition of a deferred inflow of resources.

Quiz 2: Principles of Accounting and Financial Reporting for State and Local Governments